- Total revenues from continuing operations increased 7% to $3.0 billion
- Diluted earnings per share from continuing operations increased 16% to $1.04 per share
- ADP acquired 7.5 million shares of its stock for treasury at a cost of $647 million in the quarter
ROSELAND, N.J., April 30, 2015 (GLOBE NEWSWIRE) — ADP® (Nasdaq:ADP), a leading global provider of Human Capital Management (HCM) solutions, today announced its third quarter fiscal 2015 financial results. Compared to last year’s third quarter, revenues from continuing operations grew 7% to $3.0 billion and pretax earnings grew 12% to $743 million. Growth in revenue and pretax earnings was negatively impacted two percentage points by unfavorable foreign currency translation. Pretax margin expanded 110 basis points in the quarter to 24.5%, which included a negative impact of about 20 basis points from the client funds extended investment strategy.
Diluted earnings per share from continuing operations increased 16% to $1.04, on a lower effective tax rate and fewer shares outstanding compared with last year’s third quarter, and was negatively impacted about two cents from unfavorable foreign currency translation. Worldwide new business bookings, representing annualized recurring revenues anticipated from new orders, grew 6% compared with a strong performance in last year’s third quarter.
“ADP had another successful quarter as we continue to help our clients maximize their investments in their people,” said Carlos Rodriguez, president and chief executive officer, ADP. “Our results are directly attributable to the continued focus and dedication of ADP teams around the world that are driving our HCM strategy.”
“ADP delivered a solid quarter of revenue and earnings growth despite pressure from unfavorable foreign currency translation, and I am pleased with the margin expansion in our business segments,” said Jan Siegmund, chief financial officer, ADP. “ADP continues its shareholder friendly actions, and through the third quarter of fiscal 2015 has repurchased 13.3 million shares at a cost of $1.1 billion, reflecting our continued commitment to return excess cash to shareholders.”
Third Quarter 2015 Segment Results
Employer Services – Employer Services offers a comprehensive range of HCM and business outsourcing solutions.
- Employer Services revenues increased 5% compared to last year’s third quarter, and were negatively impacted by three percentage points from unfavorable foreign currency translation.
- The number of employees on ADP clients’ payrolls in the United States increased 3.1% for the quarter when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses.
- Employer Services client revenue retention declined about 50 basis points compared to last year’s third quarter, but on a fiscal year-to-date basis remains at record levels.
- Employer Services pretax margin increased approximately 190 basis points compared to last year’s third quarter resulting from increased operating scale and productivity.
PEO Services – PEO Services provides comprehensive employment administration outsourcing solutions through a co-employment relationship.
- PEO Services revenues increased 15% for the third quarter compared to last year’s third quarter.
- PEO Services pretax margin increased approximately 150 basis points compared to last year’s third quarter, primarily driven by sales productivity and operating efficiencies.
- Average worksite employees paid by PEO Services increased 13% for the quarter to approximately 369,000.
Interest on Funds Held for Clients
The safety, liquidity and diversification of ADP clients’ funds are the foremost objectives of the company’s investment strategy. Client funds are invested in accordance with ADP’s prudent and conservative investment guidelines and the credit quality of the investment portfolio is predominantly AAA/AA.
- For the third quarter, interest on funds held for clients increased 1% to $101 million from $100 million a year ago.
- Average client funds balances increased 4% in the third quarter to $26.2 billion compared to $25.2 billion a year ago.
- The average interest yield on client funds was 1.5% in the third quarter and was down slightly compared to a year ago.
Fiscal 2015 Outlook
ADP now anticipates full-year fiscal 2015 revenue growth of approximately 7% compared with the prior forecast of 7% to 8% due to negative pressure from foreign currency translation which is expected to impact full year revenue growth by about two percentage points. Diluted earnings per share from continuing operations is now expected to grow about 14% from $2.58 in fiscal 2014 compared with the prior forecast of 12% to 14%.
This forecast anticipates at least 75 basis points of pretax margin expansion from 18.4% in fiscal 2014. ADP now anticipates an effective tax rate of 33.7% compared with the prior forecast of 34.2%. Worldwide new business bookings are still anticipated to grow about 10%.
Reportable Segments Fiscal 2015 Forecast
- For the Employer Services segment, ADP still anticipates revenue growth of approximately 5% which includes an expected negative impact of about two percentage points from foreign currency translation. ADP now anticipates Employer Services pretax margin expansion of about 125 basis points compared with our prior forecast of about 100 basis points.
- ADP anticipates an increase in pays per control of about 3.0% for the year compared with the prior forecast of 2.0% to 3.0%.
- For the PEO Services segment, ADP now anticipates approximately 16% revenue growth compared with the prior forecast of 15% to 17%. PEO pretax margin is anticipated to expand about 100 basis points.
Interest on Funds Held for Clients, Interest Income on Corporate Funds Fiscal 2015 Forecast
The interest assumptions in ADP’s forecasts are based on Fed Funds futures contracts and forward yield curves as of April 28, 2015. The Fed Funds futures contracts used in the client short and corporate cash interest income forecasts do not anticipate an increase in the Fed Funds target rate during fiscal 2015. The three-and-a-half and five-year U.S. government agency rates based on the forward yield curves as of April 28, 2015 were used to forecast new purchase rates for the client and corporate extended, and client long portfolios, respectively. ADP has updated the forecast for interest on funds held for clients and the client funds extended investment strategy to include an expected negative impact from foreign currency translation. The updated forecast is outlined below.
- Interest on funds held for clients is now expected to increase about $5 million, or 1%. This compares to the prior forecast of an increase of $5 to $15 million, or 1% to 4%. This is based on anticipated growth in average client funds balances of 5% to $21.7 billion, partially offset by a decrease of up to 10 basis points in the expected average interest yield to about 1.7%.
- The total contribution from the client funds extended investment strategy is also expected to increase about $5 million compared to the prior forecast of an increase of $5 to $15 million.
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